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Uruguay Polarizes Over Oil Privatization

The center-left opposition forced the government to hold a referendum concerning a controversial bill that allows the state-owned oil monopoly to sign association agreements with foreign companies

The country is experincing its worst-ever crisis after last year's financial collapse

The streets of Montevideo, the old but modern European-style capital city of Uruguay, are a good picture of country's downfall. Homeless digging in the rubbish to find something to eat and empty shops all along the center of the city vanished the dreams of those who attempted to build a South American Switzerland of this agricultural nation.


Last year, Uruguay was hit by the echoes of the crisis in Brazil and Argentina, country's "big brothers" in Mercosur block, and entered into a deep recession that left almost 30% of its 3.3 million population under the poverty line and 17.5% unemployed. The financial system was on the brink of collapse in August 2002, after the government decided to suspend bank activity to stop a spectacular flight of deposits - mainly belonged to foreign investors. Then, the ruling coalition composed by country's both traditional political forces (the red and the national parties) negotiated a costly deal with the International Monetary Fund to avoid the crash.


Since then, Uruguay began its way down. "Uruguay lives a dramatic crisis, thanks to those that tried to turn the country into a fiscal paradise and destroyed our industrial production", tells PRAVDA.Ru Marina Arismendi, Nat. Senator for the center-left coalition Frente Amplio (Broad Front) and Secreatry-General of the Communist Party of Uruguay. "Official figures show that unemployment have reached 20%, but there are areas in some provinces, in which over 50% of the people is unemployed ", she explains.


The Frente Amplio is the coalition of left wing parties that was close to win 1999 presidential elections. Despite winning the first round, a last minute electoral agreement between the traditional political forces in the runoff frustrated its candidate, Montevideo's physician Tabare Vazquez, to take office. In March 2000, Vazquez's competitor, Jorge Batlle, was sworn in as President. Since then, Uruguay deepened pro-market reforms and supported US foreign policy toward the region, as well as the war on Iraq.


Despite several attempts to privatise public services and state-owned energy companies, Uruguayans have repeatedly opposed to such measures. However, the ruling coalition passed a law that allows the National Oil Company ANCAP, to sign association agreements with foreign enterprises. The opposition believes the government is trying to sell the company: "We are fighting for a referendum to stop ANCAP's covered privatization, as its refinery pumps enough oil to feed the internal market and even export the surplus", says Sen. Arismendi. "As the company has been built up thanks to local taxpayers, we are sure the citizens will vote against privatization".


In fact, last polls show that over 40% of the Uruguayans would vote against the bill on the referendum scheduled for December. However, it is not enough, as country's constitution calls for 50% of negative votes to stop the law from coming into force.    


Last month, opposition leader Tabare Vazquez asked President Batlle for a public confrontation on the issue, but the Head of State refused to participate. "I believe that ANCAP's issues are much more important than public debates", replied Batlle. "The main discussion is whether our country wants to be part of the world, or not".


As the country prepares for 2004 presidential elections, authorities are afraid the referendum could lead to a broader discussion that may include the government itself. Analysts believe that the deep social crisis would lead to a victory of the opposition at that time, but an adverse result in the referendum could speed up the renewing process.


Although it is a plausible chance, FA's leaders are cautious, as they do not want to damage democratic institutions. "The election campaign starts next year. Now, we have to vote for ANCAP and to push active policies to resolve pending social issues", says Arismendi.


In June, Batlle's administration complied with the constitutional accountability system, as submitted to the Congress a full report of its activities all along 2002. It is expected that discussions will increase as referendum date approaches.